If GM FAILS

[chpthril]

If GM goes bust then work out a deal with Cummins. Ready made ballast and all the torque you could want for hole shots. Not many diesel pumps at the lake, however.

That and cost are the only 2 downsides

[Fast1911]

If GM fails I would think there would be a chapter 11 filing first to allow them to re-organize product line, re-negotiate crippling union contracts and share a corporate jet with Ford. It is possible that they fall on harder times and fail and entirely possible that the marine industry purchase inventory ( highly unlikely) of the Vortex 5.7 block and associated component rights are sold off to highest bidder and needed demand which Could be MP,PCM, Ind mar etc. I would bet on reorganization and the Vortex stays with GM because it is an asset and a probable money maker for them.

MoneyPit is right.

coincidence??????????????????????????????????????? ???????????????

[Grant]

GMs problems are hitting home already for some of us mx/sx cross over boaters.
GM Dumps Suzuki Shares In Effort To Conserve Cash
General Motors Corp., seeking a federal bailout as its cash dwindles, will raise 22.4 billion yen ($230 million) by selling its 3 percent stake in Suzuki Motor Corp.



A move to spend about $230 million to buy back Suzuki Motor Corporation shares held by GM is behind the company's drastic cutbacks in racing programs, according to sources inside the company.

The company has slashed existing U.S. racing programs--pulling out completely from dirt track, for example--and may not even field an official Superbike team.

Company insiders said that Chairman Osamu Suzuki decided to buy back the shares because he did not want them sold on the open market.

As a moto cross family this news shatters the racing world for alot of us.We have one little buddy that got a factory A-ride from Suzuki for 09.
This included bikes at no cost and parts at no cost all year.He won over 8k in bonus cash the week of Thanksgiving he can not collect .His 08 contract was up after the Lyretta Lynn National Chmp.His 09 contract was a verbal until what would have been this month.He will lose out on thusands of $$$ over this.Worst of all his father gets to tell him he is no longer a factory rider for ROCK STAR SUZUKI .Hard pill to swallow when you are one of the fastest kids in the usa.You got to love corp.America.I forgot to mention he has been racing for 7 years and is only 11.

[MoneyPity]

This is what happens when you listen to sales and focus only on gross margins. You're counting on the fact that the company will cover it's overhead (all your other costs above and beyond cost of goods sold, aka COGS) beyond a certain threshold in volume (i.e., the net margin after taking into account all your other costs). The only problem is that most companies have absolutely no idea what that threshold is. In GM's case, the net margin is far smaller than they think and most probably is below zero. For some products, it's entirely possible that even your net margins will never be above zero. In this case, pumping up volume only further accelerates your decline (we call it the death spiral...think of it like a floating object that gets sucked down the little whirlpool in a bathtub that's draining). While I'm not in favor of a bailout, I could be persuaded IF they were forced to figure out what their net margins actually are AND they were required to present a plan that included a detailed strategy to make them self-sufficient at a not too distant point in the future. The concern I have is not only with the management team's ability to actually pull this off, but the Board of Director's willingness and patience to let them do this. Unfortunately, we're in this vicious cycle of focus on short-term results instead of long-term economic value creation.

Many companies make the mistake of selling product with a marginal COG to net profit margin and hope to either make it up through other income sources say GM auto loans which have tended to be marginal within themselves at low or 0% rates or on long term service contracts where again they cannot accurately determine COG due to varying service costs, shipping costs etc. Depending on accounting methods used, they might not even be able to recognize the value and net profit from say a 5 year extended contract because COG has not been realized until the end of the contract has elapsed.
The organization I work for has a nominal COG if we ignore sales expense so in many case it will discount the software to $000,00 and sell say 3 year service and support contracts to build a long term residual which again depending on accounting method we can only recognize revenue of the service contract year by year so in the initial year it may seem like a loss because of startup issues but the reaming 2 years are more than profitable. With a renewal rate of contracts being in the 70+% range we are building long term residual income depending on how the revenue is recognized.

I agree with dogberts points that correcting the issues he raises takes time and in many cases the Board of Directors want to see short term results and with even turning around a $200 million company that takes more time than turning around a conglomerate the size of GM. In a turnaround I was involved with years ago our Board barely gave the old/new management team sufficient time to identify the most critical issues and come up with plans to correct the issues.

[jwanck11]

Many companies make the mistake of selling product with a marginal COG to net profit margin and hope to either make it up through other income sources say GM auto loans which have tended to be marginal within themselves at low or 0% rates or on long term service contracts where again they cannot accurately determine COG due to varying service costs, shipping costs etc. Depending on accounting methods used, they might not even be able to recognize the value and net profit from say a 5 year extended contract because COG has not been realized until the end of the contract has elapsed.
The organization I work for has a nominal COG if we ignore sales expense so in many case it will discount the software to $000,00 and sell say 3 year service and support contracts to build a long term residual which again depending on accounting method we can only recognize revenue of the service contract year by year so in the initial year it may seem like a loss because of startup issues but the reaming 2 years are more than profitable. With a renewal rate of contracts being in the 70+% range we are building long term residual income depending on how the revenue is recognized.

I agree with dogberts points that correcting the issues he raises takes time and in many cases the Board of Directors want to see short term results and with even turning around a $200 million company that takes more time than turning around a conglomerate the size of GM. In a turnaround I was involved with years ago our Board barely gave the old/new management team sufficient time to identify the most critical issues and come up with plans to correct the issues.

Companies might make/sell a product that loses dollars from a strictly accounting perspective to profit from Goodwill. To misunderstand or undervalue Goodwill is to miss prolly the largest element that fuels consumption. It must be used judiciously and properly to maximize value. It appears to me that the current bunch of leaders are driving America into the toilet given a purely accounting base view of how to succeed and in determining what success looks like. Long term value creation is a balance. It is not solely a matter of gaining maximum profit from each unit sold.

A buyout is necessary - there is no way to get to the next point of stability without it. Of course it is always easier to point fingers and biatch rather than address and resolve conflicts/root causes in uneasy times.

[jwanck11]

Companies might make/sell a product that loses dollars from a strictly accounting perspective to profit from Goodwill. To misunderstand or undervalue Goodwill is to miss prolly the largest element that fuels consumption. It must be used judiciously and properly to maximize value. It appears to me that the current bunch of leaders are driving America into the toilet given a purely accounting base view of how to succeed and in determining what success looks like. Long term value creation is a balance. It is not solely a matter of gaining maximum profit from each unit sold.

A buyout is necessary - there is no way to get to the next point of stability without it. Of course it is always easier to point fingers and biatch rather than address and resolve conflicts/root causes in uneasy times.

X2!

[talltigeguy]

A buyout is necessary - there is no way to get to the next point of stability without it. Of course it is always easier to point fingers and biatch rather than address and resolve conflicts/root causes in uneasy times.

Do you mean buyout or bailout?

The government (the model of how to run a business) is going to tell them how to restructure their company. I think the automakers are flawed with so many expenses that they need a painful rebuild from the ground up. And I think that Chapter 11 is going to be the only solution. A bailout will help with some short term financing, but that money comes from us anyway. We will be suffering this for years with a heavy tax burden.

They are talking 15 billion dollars....I guess that is only $5 for every man woman and child in the US.

[dogbert]

Companies might make/sell a product that loses dollars from a strictly accounting perspective to profit from Goodwill. To misunderstand or undervalue Goodwill is to miss prolly the largest element that fuels consumption. It must be used judiciously and properly to maximize value. It appears to me that the current bunch of leaders are driving America into the toilet given a purely accounting base view of how to succeed and in determining what success looks like. Long term value creation is a balance. It is not solely a matter of gaining maximum profit from each unit sold.

A buyout is necessary - there is no way to get to the next point of stability without it. Of course it is always easier to point fingers and biatch rather than address and resolve conflicts/root causes in uneasy times.

I don't think any buyout or bailout is a good idea without some requirements to answer the basic question you refer to in your first paragraph. I can tell you without a doubt that they can't do that right now and until they are in a position to do that, giving them more money is just like giving an addict more of the drug they are addicted to. It's as simple as that.

[Domsz06]

all the buyout/bailout is going to do is postpone the future. They cannot run their company correctly right now. They need to start from the ground up and look how Toyota and Honda run their business and follow it similarly.

[Surfdad]

Companies might make/sell a product that loses dollars from a strictly accounting perspective to profit from Goodwill.

GM had an adjusted net loss of 4.2 BILLION dollars for the 9 months ended 9/30/08. That's greater than the GNP of some small countries!

In my book, goodwill enhancement stops at 1 billion in losses.

It was 10% of their total sales. Who in here doesn't know that when they are spending 10% MORE than they bring in, it's time to cut back on the Netflix, or double mocha latte's at Starbucks? It wasn't until public outcry that they unloaded the corporate jets...maybe the collective public should manage GM?

[Domsz06]

Very nice point surfdad!

[dogbert]

Here's why a bailout is such a bad idea:

(CNN) -- There's no indication when -- or if -- the White House and congressional leaders will reach agreement on the Democrats' proposal to give troubled U.S. automakers a financial lifeline.
General Motors exec Bob Lutz says he sees the $15 billion proposal for automakers as a "bridge loan."

General Motors exec Bob Lutz says he sees the $15 billion proposal for automakers as a "bridge loan."

General Motors Corp. and Chrysler could get $15 billion in federal loans as soon as December 15, according to a working Democratic draft of proposed legislation and a senior Democratic congressional aide.

Meanwhile, one key GM official already is talking about the need for more help from the government -- even before this package's approval.

In an interview Tuesday on CNN's "American Morning," Bob Lutz, GM vice chairman of global product development, told anchor John Roberts that he expects the industry to go back to Washington next year for more money.

John Roberts: A lot of taxpayers are asking if you get this $15 billion collectively, what will you do to make sure your company won't fail?

Bob Lutz: Well, first of all, GM will only get a portion of that money and ... this is simply a bridge loan which will get us into the next administration, where we hope we can do something more fundamental. Because the main problem is the lack of liquidity and the lack of revenue flowing in as we're facing absolutely the lowest, lowest car market in history, and it's not just the domestics, the Japanese are all down 30 percent and 40 percent. Their inventories are piling up. You know, this isn't a question of Detroit is in trouble; the whole automobile industry is going to be in trouble

Roberts: You don't see Toyota and Honda coming to the government for a handout. But based on what you said there -- that this is just the beginning -- you're going to need more money next year?

Lutz: I think that's a reasonable assumption.

Roberts: How much more?

Lutz: At this point, you know, that's going to have to be discussed with Congress. We'll have to see. But this is definitely a bridge loan that will solve the immediate liquidity problem Video Watch the GM executive explain why automakers may need more government help »

Roberts: When you come to Congress next year and say, OK, you gave us $15 billion in December, now we need X amount of money, how difficult a sales job will that be?

Lutz: You know, I don't think anybody in Congress or the president-elect assumes that this is all the money that is going to be required to bridge this liquidity crisis that the American automobile industry is facing, and, again, it all depends on how fast we have an economic recovery. Again, let me restate this. At 10.8 or 10.5 million total market, we do not have a viable automobile industry in this country for anybody.
iReport.com: How is the automaker crisis affecting you? Should there be a bailout?

Roberts: Yesterday, you took out a full page ad in the Automotive News Journal; it was a big mea culpa. I guess on GM'S part. You said in part we acknowledge we disappointed you. We violated your trust by letting our quality fall and our designs become lackluster. You also laid out a GM commitment to the American people. First thing, you said specifically we're committed to producing automobiles you want to buy and are excited to own. There are many people who might think that's just a fundamental tenet of free enterprise, and why should that be revolutionary?

Lutz: It isn't. I think people were expecting this sort of message. What we're trying to do with an ad like that is live down this legacy of the '80s. Everybody agrees that American cars of the '80s were not very good and were not competitive with the Japanese. But that was a long time ago.

We've now equaled the Japanese in productivity and quality, and speaking for General Motors we got Car of the Year with the Saturn Aura, Car of the Year for Chevy Malibu, Truck of the Year with the Silverado, Green car of the Year with the Silverado hybrid, and on and and on. Car of the Year with the Cadillac CTS.

Roberts: One more question, Bob, certainly, as a condition of this bridge loan, the government is going to appoint a car czar to oversee what you do with it. They will talk about what kind of models you should build, fuel efficiency you should get. There will be a government approval of any vehicles you make. Who would you like to see as the car czar?

Lutz: Wait a minute. We don't know if it will be a czar or overseer. I doubt whether this person would dictate the product policy.

Roberts: Certainly an idea they are talking about. Who would you be comfortable with as car czar?

Lutz: I wouldn't even -- other than myself? Unfortunately I'm not available because I'm still gainfully employed.
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Roberts: Some people [are] floating the idea maybe [that former Massachusetts Gov.] Mitt Romney would be a good car czar. He comes down hard on you guys. His father [George Romney] ran American Motors for a time.

Lutz: Well, I hardly think that the automobile business is a genetic trait, but he would probably be satisfactory as would many other people.

[jwanck11]

GM had an adjusted net loss of 4.2 BILLION dollars for the 9 months ended 9/30/08. That's greater than the GNP of some small countries!

In my book, goodwill enhancement stops at 1 billion in losses.

It was 10% of their total sales. Who in here doesn't know that when they are spending 10% MORE than they bring in, it's time to cut back on the Netflix, or double mocha latte's at Starbucks? It wasn't until public outcry that they unloaded the corporate jets...maybe the collective public should manage GM?

They are drops in the bucket - nothing more than a show that the common man bought into.

Most Americans spend more than 10% of what they bring in. In fact, we, on average spend a LOT more than 10% of what we bring in ie. the difference between C sub zero and C sub 1. It is good thing that we do so given that is what keeps capitalism alive and has since the first loan was issued.

What I was addressing is that in this rebuilding process, current leaders are focused strictly on figures and there must be a view into what the common consumer actually wants ie. there is a reason there is a specific gift each year that is "the gift of the Christmas season." Cut costs for 99% profitability potential on junk no one wants and there will be no profit. I didn't even address the Inward Goodwill element (workforce satisfaction) that most leaders are crapping the bed on as well...

There is a reason that many people reached the conclusion that Ross Perot was a bit off-kilter.

[jwanck11]

all the buyout/bailout is going to do is postpone the future. They cannot run their company correctly right now. They need to start from the ground up and look how Toyota and Honda run their business and follow it similarly.

And it will take time to do the rebuild ... and btw this stretches far wider than the "big 3." We the people unfortunately have to finance that "time to rebuild process." I am not at all saying that I like it... I am saying it is essential nonetheless.

[Surfdad]

Debt is refelected on their balance sheet as is the result of capital expenditures. This isn't about borrowing to buy assets, or working captial loans. This is a simple equation: I made $1 this week, I'll spend all of that and 1 dollar more. They spent all of the massive debt they had on PP&E The debt service, loan repayments aren't even reflected in that 4.2 billion loss. Cash flow or the statement of Cash Flows is ridiculous.

P&L is a handy tool, don't spend more than you make, or you'll go out of business. GM said - ah shoot, let's see how many BILLIONS we can blow that rule out of the water.

That isn't capitalism, that is GM's arrogance and a total disregard for the basic principal of capitalsim - make a buck.

Interesting debate, but as we know...they'll get their money and more - does anyone remember the old Lil' Abner cartoons with General Bull Moose (aka General Motors) what's good for General Bull Moose is good for the country.